Charting a Company's Direction

Question 1

What are the decision making biases

Answer 1

1) Myopia
2) Sunk Cost
3) Information Anchoring
4) Information Availability
5) Framing Decisions

Question 2

Define Myopia biases

Answer 2

• Weighing short-term over long-term outcomes and
  controlling for a discounted rate
• Decisions based on the immediate

Example: taking $100 now over $120 1 months from now.

Question 3

Define Sunk Cost

Answer 3

Continuing to invest in failing projects in hope of getting back the original investment (e.g. you’ve already put in so much money might as well try to get something out of it)

If you buy a movie ticket and realize the movie is
terrible, you can:

Stay to “get your money’s worth” (sunk-cost
fallacy).

Question 4

Define Framing Decisions

Answer 4

Based on whether a decision is framed in terms of gains or losses; some examples include:

If you’re gambling, you’re going to bet more in order to get your money back.

Putting more aggressively for par than birdie because par is a guaranteed outcome.

Question 5

Define Information Availability

Answer 5

Valuing and using information simply because it is
favored, most recent, or readily available Recency bias:

Example:

Question 6

Define Information Anchoring

Answer 6

Over weighing information that appears first in the information flow.

Question 7

What is Shareholder’s perspective

Answer 7

• owners act in their own best interest
• bear most of the risk
• invest in projects that give ROI
• assume customer and employee needs are met
• decision making simplified
• no hidden cost

Question 8

What is stakeholder’s perspective

Answer 8

• interested in the long term v short term
• incentives for everyone
• enlightened self interest
• avoids government intervention and taxes
• makes society better
• increased employee loyalty
• basis for human rights
• “good for everyone who’s at “stake””

Question 9

What are the parts of Carroll’s corporate social responsibility (CSR) Pyramid

Answer 9

1) Philanthropic responsibilities
2) Ethical responsibilities
3) Legal responsibilities
4) economic responsibilities

Question 10

What is the purpose of a: Vision, Mission: Values

Answer 10

Vision: What we want to accomplish
Mission: How do we want to accomplish our goals
Values: framework on how we will ethically and legally to pursue our vision and mission.